Department of Transp. v. Brooks

• Decision Date: 23 April 1985
• Docket Number: 42127 and 42191,Nos. 42126,s. 42126
• Parties: , 1985-1 Trade Cases P 66,582 DEPARTMENT OF TRANSPORTATION et al. v. BROOKS et al. SHEPHERD CONSTRUCTION COMPANY, INC. et al. v. BROOKS et al. BROOKS et al. v. CITY OF ATLANTA et al.
• Court: Georgia Supreme Court

Page 705

328 S.E.2d 705

254 Ga. 303, 1985-1 Trade Cases P 66,582

DEPARTMENT OF TRANSPORTATION et al. v. BROOKS et al.

SHEPHERD CONSTRUCTION COMPANY, INC. et al. v. BROOKS et al.

BROOKS et al. v. CITY OF ATLANTA et al.

Nos. 42126, 42127 and 42191.

Supreme Court of Georgia.

April 23, 1985.

Rehearings Denied May 9 and May 10, 1985.

Michael J. Bowers, Attorney General, James P. Googe, Jr., Executive Assistant Attorney General, Marion O. Gordon, First Assistant Attorney General, Roland F. Matson, William C. Joy, Senior Assistant Attorneys General, Charles M. Richards, Assistant Attorney General, Beverly B. Martin, Staff Assistant Attorney General, for appellants (case no. 42126).

Richard N. Hubert, Orr & Edwards, W. Fred Orr II, for appellees.

Schreeder, Wheeler & Flint, David H. Flint, Lynn C. Stewart, for appellants (case no. 42127).

Richard N. Hubert, for appellees.

Richard N. Hubert, Orr & Edwards, W. Fred Orr II, Ferguson & Dorn, Sally A. Dorn, for appellants (case no. 42191).

Marva Jones Brooks, Kendric E. Smith, Overtis Hicks Coopwood, for appellees.

Alston & Bird, Sidney O. Smith, Jr., Anne S. Rampacek, Chesnut & Livingston, J. David Chesnut, amici curiae.

PER CURIAM. ¹

The plaintiffs, as residents, citizens, and taxpayers of the City of Atlanta and State of Georgia, brought this suit to enjoin performance under a contract entered into between Shepherd Construction Company and the Department of Transportation for the grading and paving of a road known as the Presidential Parkway. In addition, the plaintiffs seek to have declared null and void a vote of the Atlanta City Council enacting an ordinance transferring properties to the Department of Transportation (referred to hereinafter as the DOT) to be used as rights-of-way for the parkway. The trial court granted the plaintiffs' motion for a temporary restraining order. The court subsequently entered an order granting the plaintiffs' request to set aside the grading and paving contract (referred to hereinafter as the Shepherd/DOT contract) but denying their request to overturn the ordinance (referred to hereinafter as the land-transfer ordinance). In Case No. 42126, the DOT appeals the trial court's ruling as to the Shepherd/DOT contract. In Case No. 42127, Shepherd Construction Company (referred to hereinafter as Shepherd) appeals the same ruling. In Case No. 42191, the plaintiffs appeal the trial court's ruling as to the land-transfer ordinance. We granted the DOT's motion for an expedited appeal.

Facts

(a) Shepherd/DOT contract:

Law enforcement investigations in Georgia and other states uncovered massive conspiracies by contractors to rig the bids on highway construction projects. As a result, approximately 50 contractors in Georgia and other states were convicted on bid-rigging conspiracy charges.

On March 31, 1982, Shepherd entered a plea of guilty to charges of conspiracy and restraint of free and open competition, i.e., bid rigging, in criminal proceedings in the Fulton Superior Court. See OCGA § 16-10-22(a). ² Shepherd was placed on one year's criminal probation and, as part of its sentence, was ordered to pay restitution to the DOT in the amount of $2,225,000, in four equal installments of principal plus interest on the unpaid balance at the rate of 12% per annum. In addition, Shepherd was ordered to execute a promissory note, with a security agreement to secure the unpaid balance of the restitution.

Shepherd executed the promissory note and security agreement. Its first installment payment of restitution was due on the date of sentencing and was paid on that date. Its second installment was due in April of 1983, and it was paid six months early. Its third installment payment was due in April of 1984, and it was not paid when due. The circumstances surrounding Shepherd's failure to pay the third installment when due will be discussed more fully later in the opinion. The fourth installment was due in April of 1985, and it was paid two months early.

On April 2, 1982, two days after Shepherd pleaded guilty, the DOT suspended Shepherd's Certificate of Qualification to bid on DOT projects. ³ However, this suspension did not vitiate existing contracts previously awarded to Shepherd.

On January 19, 1983, the DOT and Shepherd entered into a Probationary Agreement. Under this agreement, the DOT agreed to restore Shepherd's Certificate of Qualification on a probationary basis, conditioned upon Shepherd's continuing compliance with the terms of the agreement. This Probationary Agreement was created by the DOT so that the DOT could let contracts to contractors implicated in bid-rigging activities; but, at the same time, the Probationary Agreements give the DOT contractual rights to prevent the contractors from engaging in anti-competitive activities. Under the Probationary Agreement, Shepherd was required to keep records of contacts with suppliers of material and subcontractors, as well as records on all successful and unsuccessful bids submitted on DOT construction projects. The Probationary Agreement does not address the matter of restitution.

On or about November 13, 1983, Shepherd became eligible to bid on federal-aid projects because its debarment by the United States was lifted at that time.

In the summer of 1984, the DOT conducted an audit of the bidding records of Shepherd in order to check Shepherd's compliance with the record-keeping requirements of the Probationary Agreement. This audit disclosed the fact that Shepherd in 1983 had not retained records on at least 17 projects for which it was not the low bidder. It was also discovered that in certain instances Shepherd had failed to keep records of the date and person contacted on quotes from suppliers of material and subcontractors. The DOT determined that the foregoing violations of the Probationary Agreement were not material violations, and a decision was made merely to warn Shepherd that strict compliance with the Probationary Agreement would be required in the future.

On October 4, 1984, the Presidential Parkway began to be advertised for bids. On October 24, 1984, Harold Shepherd, President of Shepherd Construction Company, telephoned Jack Newhard, President of APAC-Georgia. ⁴ According to Newhard, Shepherd asked him: "... if we were interested in [the] Presidential Parkway. I said that we were looking at it and that was all I could say. He said OK. He said we hadn't said anything wrong and that was all." Although a record of this conversation was kept by Mr. Newhard, Mr. Shepherd made no such record. Shepherd's failure to make a record of the conversation was a violation of the Probationary Agreement; however, the DOT did not become aware of this violation until February of 1985.

Meanwhile, on October 26, 1984, bids were received on the Presidential Parkway project. On the grading and paving portion of the project, Shepherd's bid of $15,491,000.76 was the lowest bid. APAC-Georgia made the next lowest bid, which was $1,380,000 higher than Shepherd's bid. Consequently, Shepherd was announced as the apparent low bidder on the grading and paving contract. In addition, Arapaho Construction, Inc., was announced as the apparent low bidder on the contract for construction of the Presidential Parkway bridges. Arapaho's bid was $6,526,925. On November 21, 1984, Shepherd was awarded the grading and paving contract, and Arapaho was awarded the contract for construction of the bridges. Work commenced on the project on December 6, 1984.

On January 7, 1985, the DOT discovered that Shepherd had not made the restitution installment payment due in April of 1984. The DOT called Shepherd and demanded payment. On January 8, 1985, Shepherd paid the $562,500 principal amount of the installment plus $308,000 interest. Because the installment payment was promptly paid following the demand, the DOT took no further action against Shepherd as a result of the late payment. In addition, Shepherd's debt to the DOT was fully secured, and the interest ultimately paid by Shepherd on its third installment exceeded the interest the DOT would have earned if the funds had been paid when due and invested in state depositories.

On February 13, 1985, the DOT discovered that Harold Shepherd had failed to make a record of his October 24 telephone conversation with Jack Newhard. When questioned by an agent of the DOT, Mr. Shepherd stated that the purpose of the conversation was to ask Mr. Newhard if he was going to bid the project, and that Mr. Newhard told him that APAC was going to bid it. On February 19, 1985, Shepherd's Certificate of Qualification was suspended pending a hearing before the DOT's Prequalification Committee. On February 27, 1985, the Prequalification Committee revoked Shepherd's Certificate of Qualification because of Shepherd's failure to keep a record of the conversation with Newhard after being warned that strict compliance with the record-keeping provisions of the Probationary Agreement would be required.

After a consideration of the matter, the State Transportation Board decided, for the following reasons, not to rescind Shepherd's contract for the paving and grading of the Presidential Parkway: (1) It would add more than $2 million to the cost of the project to remove Shepherd, re-let the project, and obtain a new contractor. (2) To cancel the contract would throw the DOT's entire contracting process into chaos, because Shepherd has 32 other DOT contracts by itself and 12 joint projects. (3) The bridge contractor, Arapaho, has mobilized forces and has gone to work relying upon a construction schedule with Shepherd. (4) A delay on this project at this time of year precludes use of the most valuable construction weather; and there would be a substantial delay if the project had to be re-advertised, re-bid, and re-awarded. (5) The DOT does not have a problem with Shepherd's doing quality construction work in a timely fashion; according to the DOT, Shepherd is "one of the best...